Conflicting signs in Singapore property market

Most indicators are pointing to a gradual moderation in the property market in Singapore.

But latest figures showing a 1.4 per cent month-on-month growth in home loans have got some analysts wondering if the outlook is as clear cut.

Latest figures from the Monetary Authority of Singapore (MAS) showed that building and construction loans growth in May fell 13 per cent month-on-month to S$59 billion.

New private home units sold in May also fell 13 per cent to 1,575, compared to 1,805 units a month ago.

The Urban Redevelopment Authority’s (URA) private residential property price index also showed that private home prices have been moderating for seven consecutive quarters.

However, home loans increased by 1.4 per cent increase in May to S$119.7 billion, representing a 0.3 percentage-point rise after falling 0.2 percentage-point in the previous month, suggesting that investors could still be bullish on the property market.

And some analysts expect home loans growth to remain firm for the rest of the year, and this could prompt further cooling measures.

“We’ve seen a pick-up in the lending into the broader market with the May figures. If we also see that in June and July, despite signs out there pointing to perhaps a moderation in economic growth, then I think it certainly will suggest that the government ought to do a bit more in terms of cooling down sentiment,” said Song Seng Wun, regional economist at CIMB.

For now, the growth in home loans looks likely to stay.

Song said: “Despite the high year-ago base, the numbers will still stay fairly firm, unless of course, we see a very significant turn in sentiment – either more aggressive tightening measures from the government here which (will) lead to a big fall off in sentiment, or an external development, which perhaps may cause potential home owners or developers to hold back.”

External developments that could affect sentiment in the property market are the debt issues in the US and the eurozone.

With so much uncertainty in the residential property sector, investors might want to consider property stocks as an alternative to buying real estate.

Though investment houses like Citi and UBS have downgraded the stock ratings of large residential developers, analysts said some property stocks offer good value.

“When we talk about the property sector within Singapore, we like counters that are more aggressive in changing their business strategies to the prevailing environment,” said Liu Jinshu, investment analyst with SIAS Research.

According to SIAS Research, these include counters such as Oxley Holdings and TEE International.

Source : Channel NewsAsia – 6 Jul 2011

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